Evergrande Group’s CEO, Hui Ka-yan, is likely to get $2 billion profit from the company. The 13 years-old Group’s shares increased by 3.3% after it announced a new share price at 1.42 yuan per stake for December 31, 2019. The new share price will raise the company’s capital to $2.7 billion. Hui, who owns 78% of the stake, is likely to get a handsome share from the company’s profits for the current fiscal year.
A venture of Electric Cars amid Crisis
Despite being a leading Chinese real estate company, Evergrande Group has been facing problems due to the rapid decline in its business. It had a 13% decline for 2019 and Hui refused his salary last year, which was used to pay off the company’s fees of about $34,000.
Amid the crisis, the company is investing a chunk of money for making electric cars in the next 3 to 5 years. With this investment for electric-cars, Evergrande’s net debt-to-equity ratio will be rising to around 153%, which makes the company one of the highest debt-owing Chinese real estate groups.
According to Kristy Hung, Bloomberg Opinion’s banking and real estate analyst, “Evergrande’s dividend is set to further aggravate its cash crunch. The confluence of weak first-half sales, falling cash collections, and cash burn from its electric-vehicle foray means Evergrande will struggle to shake off enough net debt to hit its target – 70% of equity – by mid-2020.”
As explained by an Evergrande’s official, “the decision of producing electric cars is considered risky at the time when the company’s revenue has been shrinking.” Moreover, the company plans to compete with the globally established electric vehicles (EV) producers including Elon Musk’s Tesla, which has already invested considerably for the production of and research on EVs in China.
Shareholders’ Decision of Dividends
According to the Bloomberg Billionaires Index, at present, “Hui has a net worth $27.5 billion”. The estimated dividend of Hui from the company’s revenue is likely to increase the CEO’s net asset; however, the distribution of the profits is likely to have a negative impact on the company.
According to Bloomberg, “The proposed dividend translates to a 50% payout ratio of the developer’s 37.4 billion yuan profit last year, the same since its listing. Shareholders will vote whether to approve the dividend at an extraordinary general meeting on January 15, 2019”.
Evergrande has been facing hardship, as the payments of dividends are due for the past three financial years, including the decision of the 2018 dividend, which is likely to be paid on or before February 26, 2020, if approved by shareholders. The company is likely to release its annual report in March 2020 for the fiscal 2019 dividends, which will have a grave impact on the company.
I’m a business journalist, working with multiple news outlet. I love to talk and analyze the market and current business news. Feel free to drop me a note if you like my reporting or if you wanna grab a coffee and have some inside news for me
You can always reach out to me at [email protected]